How Loan Forgiveness Works
Most loan forgiveness programs, regardless of their sponsors, generally work the same way. As mentioned, they’re fairly easy to qualify for, but they do require the college graduate to be flexible in which jobs she takes in the first few years after graduation.
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There are certain situations that no one should wish for, but that almost assuredly result in loan cancellation, which is virtually identical to loan forgiveness. If the borrower dies or becomes totally and permanently disabled, loans are typically forgiven. Additionally, if a student’s school ceases to exist before she can complete her education, the school fraudulently certified the loans, or the student was subject to identity theft, any loan balances are likely forgivable. It’s important to note, however, that filing bankruptcy will not usually result in loan forgiveness.
Before we break out the details and application process for loan forgiveness, let’s clear up one misconception about loan forgiveness and payment. In most cases, loan forgiveness programs are offered by a government organization in addition to the paycheck your employer offers you—not instead of your paycheck. In fact, your employer has very little to do (if anything at all) with whether you are approved for loan forgiveness or how much loan forgiveness you receive. In short, loan forgiveness is like a bonus on top of what you’re going to be paid to do your job. Great deal, huh?
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